Question

Nattel Corp. issues 10,000, $1,000 face amount bonds at 104. Each bond can be converted into 25 shares of no-par common stock. Two years after issuance, 25% of the bondholders convert their bonds. The balance in the premium on bonds payable account is $300,000. Nattel should recognize this conversion by crediting common stock for

Answer 1

The correct answer is "$2,575,000".

Step-by-step explanation:

Given:

Face amount,

= $1,000

Nattel corp. issues,

= 10,000

Number of bondholders convert their bond,

= 25%

Balance in premium,

= $300,000

Now,

Nattel should recognize by crediting,

=
`(10,000* 1,000 + 300,000)* 25 \ percent`

=
`(10,000,000+3000,000)* 0.25`

=
`10,300,000* 0.25`

=
`2,575,000` ($)